Bitcoin’s position as the number one cryptocurrency might be lost to Ethereum which has so far, been recording massive growth streaks in 2020.
With 261% value gained in 2020 as opposed to Bitcoin’s 65%, Ethereum is becoming more popular and profitable. Ethereum has also seen a surge in active address count. Its 118% count leaves Bitcoin’s 49% in the dust. In the words of Messari‘s Chief Executive, Ryan Selkis, “The level of development on Ethereum is crazy”.
Ethereum’s “crazy” development, as Ryan puts it, has been driven largely by DeFi (decentralised finance). DeFi is a relatively new concept in the crypto world, and it has got everyone talking. DeFi is now arguably the most active sector in the blockchain base.
DeFi basically turns traditional financial instruments, such as loans and insurance funds, into peer to peer finance through decentralized technologies created on blockchain.
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Majority of DeFi projects runs on the Ethereum blockchain because of its ability to execute smart contracts. DeFi technology eliminates the need for intermediaries in collateralized loans, accepting deposits and insurance.
With advantages such as these, a lot of people have been making good use of the technology. DeFi’s boom can be seen in terms of its total value locked (TVL). A lot of crypto has poured into the platform in 2020.
There has been a dramatic increase from $4.2 billion to $7.88 billion within August alone.
The ethereum-based DeFi protocols have forced bitcoin owners to lock their bitcoin into smart contracts that in turn, give them Ethereum-based tokens.
According to research published by Messari, more than half a billion dollars worth of bitcoin has been sent to Ethereum in 2020. This accounts for 0.3% of bitcoin’s supply.
Although Ethereum is racking up numbers, it is still way behind bitcoin in price. With a market cap of $45 billion, it’s still far from Bitcoin’s $221 billion.
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However, Bitcoin only started to take off in 2013, 4 years after its inception. That year, one bitcoin was traded at $13.50. Although the prices soared to around $1,079 towards the end of the year, it suffered quite a crash in 2014. As at January 2014, 5 years after its launch, Bitcoin’s market cap was $10 billion.
In Ethereum’s 5 years of existence, it has gained a market cap four times what Bitcoin had when it was 5 years. Bitcoin might currently be ahead of Ethereum, but Ethereum seems to be closing that gap— and fast.